tag:blogger.com,1999:blog-7626015.post403700979367528684..comments2016-07-09T01:01:45.612-07:00Comments on God Shot: Stumptown Steps Upchrishttp://www.blogger.com/profile/07259964812670851159noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-7626015.post-43136546731547680672011-06-25T13:09:12.668-07:002011-06-25T13:09:12.668-07:00Without a doubt I have no basis on which to make a...Without a doubt I have no basis on which to make a precise or meaningful distinction between those two forms of capitalization. Would you have the patience to clarify how the distinction affects the potential pressures on Stumptown that I articulate above? Or perhaps the whole analysis can be called into question on multiple points. All of that is of potential interest...S. Hershhttp://www.blogger.com/profile/11803279095403383342noreply@blogger.comtag:blogger.com,1999:blog-7626015.post-51749967133716273502011-06-25T11:36:21.568-07:002011-06-25T11:36:21.568-07:00It&#39;s important to differentiate VC (venture ca...It&#39;s important to differentiate VC (venture capital) from PE (private equity). They are very different businesses with very different models and very different practices. Conflating the two tends to lead to poor analysis and conclusions.chrishttp://www.blogger.com/profile/07259964812670851159noreply@blogger.comtag:blogger.com,1999:blog-7626015.post-64353921963936044912011-06-25T09:59:18.180-07:002011-06-25T09:59:18.180-07:00That is a really interesting and informed point of...That is a really interesting and informed point of view: thanks for posting. I don’t come to this with the same specific experience with VC, and while I do have an “oar in the water” in the coffee business, it is a mighty small oar to be sure. Still I have some thoughts:<br /><br />Personally I wouldn’t worry about VC running Stumptown aground. The scalability of the coffee business has been proven many times. Historically, the scaling up of coffee business has created challenges to quality and individuality just as it has in other agro-based industries. While Stumptown as a brand can flourish, the new expectations of ROI may change the nature of the company at least as much as the infusion of funding for development may help it grow. <br /><br />Among many things I probably can’t see, I notice two tensions/pressures that seem worth mentioning:<br /><br />1. Unlike the wine world, the entire super-specialty coffee world is still largely over the heads of consumers. Some may notice that the products taste better, but there is very little awareness of origin, processing, and roasting along with many other critical factors in the production of top-notch coffee. Whether or not a critical mass of consumers will “catch up” to the degree that people like George Howell and others have long hoped, is anyone’s guess. In the mean time cold brew coffee with it’s pleasant flavor but relative lack of distinctiveness sells as well as anything in a high end coffee shop.<br />2. Coffee as a commodity remains highly volatile. Where consumers accept volatility in the wine market, they have not yet been conditioned to accept volatility in the coffee market which means the risks inherent in volatility must be largely absorbed by the industry.<br /><br />If the expectation of relative price stability continues to be pervasive in the retail coffee market it will create challenges for all segments of the coffee industry, but especially for the high-end specialty market where price swings can be so profound. Those companies that are leveraged will feel these challenges more and sooner than companies that are not leveraged. Further, if consumer expectation continues to favor product reliability, the industry as a whole will be further dis-incentivized to production of individual micro lots that hold so much aesthetic interest right now. <br /><br />So while the coffee business is scalable, it remains to be seen the extent to which the specialty coffee business is scalable. Surely the folks at TSG must have contemplated all of this and more. Do they anticipate a coming change in consumer expectation? Will customers begin to embrace (and be willing to pay for) differences of terroir processing and roasting? Does TSG expect to tailor the development of Stumptown’s growth to respond to current consumer expectation or do they plan to lead the way for change? <br /><br />At any rate it would seem that it is a time when all who are leveraged in the coffee business should be wary, with or without the emergence of Stumptown “on Steroids.” For small, specialty companies who carry little debt the continued growth of Stumptown, Intelligentsia, and Counter Culture may create enormous obstacles to the acquisition of top notch micro lots. But without a change in consumer demand it is difficult to imagine a company with hungry investors waiting, continuing to stay focused on, and devote resources to micro-lot coffee production, with it’s limited scalability and current marginal ROI.S. Hershhttp://www.blogger.com/profile/11803279095403383342noreply@blogger.comtag:blogger.com,1999:blog-7626015.post-72525660694953617842011-06-22T15:35:57.017-07:002011-06-22T15:35:57.017-07:00Chris,
A well thought out and smartly written pie...Chris,<br /><br />A well thought out and smartly written piece about Stumptown&#39;s great catch. <br /><br />It will be interesting to see how this plays out in the next couple of years, especially if Stumptown lands firmly in Chicago... and LA.<br /><br />Hopefully, I hope this competition between the big boys of Specialty Coffee brings greater awareness of good coffee to the general populace.caffe d'bollahttp://www.blogger.com/profile/11604293376204662143noreply@blogger.comtag:blogger.com,1999:blog-7626015.post-76977772903266060542011-06-22T13:49:01.707-07:002011-06-22T13:49:01.707-07:00Chris,
My feelings exactly on your first point. Th...Chris,<br />My feelings exactly on your first point. This is what I&#39;ve said to people who have asked me about it. In many ways, this is a win for quality coffee and companies dedicated to it on every level.Prof. Schooliosis, the Crooked MixMasterhttp://www.blogger.com/profile/06832654487636048361noreply@blogger.comtag:blogger.com,1999:blog-7626015.post-20261052830825091092011-06-22T13:11:38.999-07:002011-06-22T13:11:38.999-07:00Thanks Kevin. Honestly, I think it&#39;s just that...Thanks Kevin. Honestly, I think it&#39;s just that I have some perspective (both professionally and emotionally) that a lot of folks don&#39;t have right now.chrishttp://www.blogger.com/profile/07259964812670851159noreply@blogger.comtag:blogger.com,1999:blog-7626015.post-44585585717216208642011-06-22T13:10:11.691-07:002011-06-22T13:10:11.691-07:00This is the best thing I&#39;ve read on this topic...This is the best thing I&#39;ve read on this topic - and so refreshing after all of the negative, sensationalistic coverage in local Portland rags and elsewhere. <br /><br />Thanks for writing it.Kevin Knoxhttp://www.blogger.com/profile/02151736463964404979noreply@blogger.com